Investors Want Disclosures That Make Sense; Also a Pony, World Peace

Posted on by Adrienne Gonzalez

This according to Compliance Week:

“Investors pretty much said to a person they're not turning down disclosure,” says Kenneth Daly, president and CEO of the National Association of Corporate Directors, which recently convened an investor summit to hear from major investor groups. “At the same time, they made it abundantly clear, there are lots and lots of technicalities described in the disclosures,” especially with respect to complex disclosures in consolidated financial statements. “Many believe it to be excessive,” he says.

In reaction, CW's Matt Kelly noted that was a cool story, bro and also that he wants to be an astronaut.

Let's be real, disclosures are disclosures for a reason. If a company wanted them to be truly useful, they wouldn't be disclosures now would they?

As we know, the SEC is already "working" with FASB on disclosure reform, which I'm sure will lead to major improvements that will satisfy both public companies and investors because that's what the SEC does:

“Updating our rules is only one step – albeit an important one – in improving company disclosures,” said Keith F. Higgins, Director of the SEC’s Division of Corporation Finance.  “For their part, companies should examine how they can improve the quality and effectiveness of their disclosures and how our rules can be improved to facilitate clear and effective communications to investors.  Better disclosure benefits everyone in the marketplace, and we plan to work with companies and investors to achieve this common goal.” 

Call us when you've got that all worked out, guys. Until then, I'll be in the stable tending to my unicorn.

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A Few People Noticed That New Century Execs Settled with SEC

There were just a few reports late on Friday about New Century Execs settling with the SEC over the failure to make certain risk disclosures. However, it’s worth mentioning that this is still more coverage than the settlement that KPMG reached with New Century that we reported on in late June – still no press release – but that’s neither here nor there.


SEC statement:

On July 29, 2010, the Commission accepted settlement offers from three former officers of New Century Financial Corporation. Brad A. Morrice, the former CEO and co-founder; Patti M. Dodge, the former CFO; and David N. Kenneally, the former controller, consented to the relief described below without admitting or denying the allegations in the Commission’s Complaint. The settlement offers, which have been submitted to the Court for approval, are contingent upon the Court’s approval of a global settlement in In re New Century, Case No. 07-931-DDP (C.D. Cal.).

The Commission’s complaint alleges, among other things, that New Century’s second and third quarter 2006 Forms 10-Q and two late 2006 private stock offerings contained false and misleading statements regarding its subprime mortgage business. The complaint further alleges that Morrice and Dodge knew about certain negative trends in New Century’s loan portfolio from reports they received and that they participated in the disclosure process, but they did not take adequate steps to ensure that the negative trends were properly disclosed. The Commission’s complaint also alleges that in the second and third quarters of 2006, Kenneally, contrary to Generally Accepted Accounting Principles, implemented changes to New Century’s method for estimating its loan repurchase obligation and failed to ensure that New Century’s backlog of pending loan repurchase requests were properly accounted for, resulting in an understatement of New Century’s repurchase reserve and a material overstatement of New Century’s financial results.

That “material overstatement” consisted of a $90 million profit in Q3 of ’06 that was actually a $18 loss.

Morrice, Dodge and Kenneally all agreed to cough up some of their ill gotten gains and were subjected to fines but they didn’t come close to Michael Dell sized proportions.

SEC Settles with Former Officers of Subprime Lender New Century [SEC]
Ex-New Century Managers to Pay $1.5 Million Over Subprime Lender’s Failure [Bloomberg]

SEC Needs More Time to Get Their Heads Around IFRS

A recommendation on whether U.S. companies should switch to international accounting rules will take a few more months, the Securities and Exchange Commission’s chief accountant said Monday. The SEC’s staff had been expected to make a recommendation by year-end on whether U.S. companies should adopt the global rules, known as International Financial Reporting Standards. But the staff needs “a few additional months” to complete its work, SEC Chief Accountant James Kroeker said. [WSJ]